Irish Bond Yields Slide on Loan Extension as Portugal Debt Rises

Ireland’s 10-year government bonds rallied for a second week, pushing the yield to the lowest since December 2006, after euro-region finance ministers agreed a seven-year extension on the the nation’s bailout loans.

Portuguese two-year notes climbed for a ninth week, the longest run of gains in 12 years, after its international loans were also lengthened. Italian 10-year bonds rose for a second week as the nation’s borrowing costs fell at an auction of 7.2 billion euros ($9.4 billion) of securities. Euro-area governments and the European Financial Stability Facility sold 31.7 billion euros of bonds and notes last week. Spain is due to sell bonds maturing from 2016 to 2023 on April 18.

“The extension is helping to underpin sentiment for Irish government bonds,” said Owen Callan, an analyst at Danske Bank A/S in Dublin. “It is a positive signal to the markets. It sends a strong message that Europe is willing to offer assistance and support program countries.”

Irish 10-year bond yields dropped 16 basis points, or 0.16 percentage point, in the week to 3.89 percent at 4:55 p.m. in London yesterday. It fell to 3.88 percent on April 11, the lowest since Dec. 22, 2006. The price of the 3.9 percent security maturing in March 2023 rose 1.28, or 12.80 per 1,000-euro face amount, to 100.05.

The rate on Portuguese two-year notes dropped six basis points to 2.91 percent, taking its run of weekly gains to the longest since January 2001.

Positive Decision

“The ministers of the Eurogroup would like to take a definite and positive decision on this extension,” Dutch finance minister Jeroen Dijsselbloem told reporters in Dublin yesterday after chairing a meeting of euro-region finance ministers. The maximum average maturities of the loans for Ireland and Portugal will be extended by seven years, he said.

Italian 10-year bond yields fell five basis points to 4.33 percent, while the rate on Spain’s 10-year securities slid six basis points to 4.69 percent.

Italy sold 4 billion euros of new 2.25 percent 2016 notes at 2.29 percent two days ago. That compared with 2.48 percent on similar-maturity debt allotted on March 13. The Rome-based Treasury also allotted 1.67 billion euros of 2028 bonds and 1.5 billion euros of floating-rate securities maturing in 2017.

Spain plans to sell 3.3 percent notes maturing in 2016, 4.5 percent securities due in 2018 and 5.4 percent 2023 bonds at auctions on April 18.

German investor confidence fell from a three-year high in April, economists predicted before a report on April 16. An index of investor and analyst expectations fell to 42 from 48.5 in March, according to the median estimate of economists in a Bloomberg survey before the report from the ZEW Center for European Economic Research in Mannheim.

Irish government bonds have returned 6.1 percent this year through April 11, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Portuguese bonds returned 2.1 percent and German securities rose 0.5 percent.

Before it's here, it's on the Bloomberg Terminal.